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AT&T, the largest U.S. telephone company, said Monday that it was ending the $39 billion deal following a lawsuit from the Justice Department and opposition from the Federal Communications Commission.

"With AT&T pulling the plug, it's pretty clear this administration has changed the landscape on merger policy" with stricter enforcement, said Paul Gallant, a Washington-based analyst with Guggenheim Partners.

AT&T wooed Democratic-leaning labor unions, winning support from the Communications Workers of America and the AFL-CIO. It drew letters of support filed with the FCC from groups representing cattle ranchers, songwriters, balloonists, governors and technology companies.

The approach ultimately failed because AT&T, led in Washington by senior executive vice president Jim Cicconi, misjudged the regulatory atmosphere, said Craig Aaron, president of policy group Free Press, based in Florence, Mass. Now AT&T ends up with a pretax charge of $4 billion to reflect payments and consideration to T-Mobile owner Deutsche Telekom.

"AT&T thought it could get it done simply because of its political clout," Aaron said. "After years and years, there didn't seem to be such a thing as antitrust enforcement anymore. But now it's clear, for some deals, there is."

AT&T spent $16 million lobbying in the first nine months this year, more than in all of 2010 and exceeding every corporation except General Electric and ConocoPhillips, according to the Center for Responsive politics, a Washington-based research group.

AT&T's political committee gave $1.7 million this year to federal candidates and political parties, more than any other corporate PAC except Honeywell International, according to Federal Election Commission records.

"This shows that future deals can't expect a rubber stamp," Aaron said. "It sets an important precedent that the most egregious deals can't be pushed through with campaign cash and the endorsement of balloon enthusiasts."

The environment is changing as regulators also scrutinize Express Scripts' proposed purchase of Medco Health Solutions. The $29.1 billion acquisition, which would result in the largest U.S. manager of pharmacy benefits for employers, insurers and union health plans, is under review by the Federal Trade Commission, and states have opened inquiries into the sale out of concern that the combined company will command too much market power.

Express Scripts' stock price has plunged 22 percent since July 21, the day the deal was announced.

Andrew Jay Schwartzman, policy director of Media Access Project, a Washington-based nonprofit law firm, said in an interview that AT&T mistakenly concluded that "politics could trump law."

He added, "I hope this will embolden the FCC and Department of Justice to remain vigilant in the face of political pressure."

AT&T's decision to call off the deal is a victory for consumers, said Sharis Pozen, acting assistant attorney general and the top antitrust official in the Justice Department.

"Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation," she said.